WHat is the definition of compensation for calculating SIMPLE dererrals in a SIMPLE IRA PLan ?

Does it exclude Section 125 cafeteria contributions ?

ADP payroll service is advising clients that compensation should not include Section 125 plan contributions.

THanks.

ADP is telling one of our clients that deferrals must stop when a participant's comp reaches the 401 a 17 limit, even if the 402 g limit has not yet been reached. Although I have seen a few plan documents that had that limitation, this one does not. Any suggestions how to get ADP to correct this?

Would someone give me an example of how a participant goes from an eligible to non eligible class? I have a participant in a Safe Harbor 401(k) who went part-time (approx. 400 hrs a year) and need to know if she is still eligible to particpate in the plan. Thanks,

We have a client that amended their plan from an off-calendar plan year to a calendar year plan year ending 12/31/10. At the same time, they amended the Profit Sharing portion of the plan to say that they will continue to make PS contributions "at the end of the fiscal year of the company ", which is 5/31. The amendment goes on to say that the "contributions will not exceed 6% of the compensation of eligible participants for the fiscal year of the Company".

Assuming that the definition of compensation used for the allocation is a SH definition of compensation, will this allocation require a 401a4 General test? Are they any other issues, e.g., 415 testing, that anyone can think of?

Employer has a 3% safe harbor with an additional matching component matching 50% of 6%. Matching contributions are per pay. Plan document excludes bonuses from the definition of compensation for deferrals only. Suppose Employee defers 6% of salary and earns $100,000 during the plan year with $50,000 in bonuses. Employee defers $3,000 for the plan year - 6% of $50,000 in compensation. Safe harbor contribution is $3,000 based on 3% of $100,000 since cannot exclude bonuses. Payroll department only matched 50% of $3,000. Isn't that match supposed to be $3,000 instead of $1,500 since it does not exclude bonuses?

Thank you!

Curious as to how handle new employees and collecting contributions when make coverage retro to date of hire. Is your read of the regs that you can't charge for the period before they affirmatively elect? Or, do you just take a double contribution at the next paycheck?

The plan is not very important to this client (actually, to his new wife who is the office mgr) so they have decided to terminate the plan this year.

The plan has several people, including these two, who are eligible partiicpants. Only the owner and the spouse have made deferrals into the plan, and subsequently received the safe harbor match. The plan was implamented in 2008.

They had $20,064 in deferrals from 2010 that were not deposited timely. This was reported on line 10a of the 2010 SF. They also owe $6246 in SHM from 2010, but that is not reported on the 5500.

As of today, they still have not paid these deposits from 2010. so my question is should I report the deferrals on the 2011 5500, since they are still oustanding? they made no deferrals for 2011 (well, according to the writtend census data they sent me last week, as they never sent the requested W-2s). and there were no deposits of any kind made into the plan in 2011, nor so far in 2012.

A university 403(b) plan excludes students performing services described in Code section 3121(b)(10). An individual who is a student during the Fall and Spring semesters continues to work for the university during the summer, but does not take classes during the summer. Assume that the summer break is more than 5 weeks long. It appears the individual is not eligible for the student FICA exception.

Must the individual be eligible for the 403(b) plan during the summer, and then be ineligible again when classes resume in the Fall?

This appears to be the technical reading, but seems to be highly impractical.

I do not find guidance on this, and welcome comments. Thank you.

One of our tax clients has a 401(k) with Principal. This client told the CPA that he amended his plan to allow them to make deferrals through April 15th. Furthermore, on April 2, 2012 he wrote a personal check for about $10,000 and asked the CPA to amend his w-2 to count this as a deferral When I said this wasn't right he checked with "Principal" and they said everything is fine.

Does anyone have nay idea what could be going on here?

Hi, does participating in EPCRS, and paying subsequent QNEC have any effect on ability to cash out the balance of a terminated employee, if even after the QNEC, the balance is under $1,000?

Thanks

I am trying to determine the plan compensation limit in the following scenario and would like to know if anyone disagrees with my interpretation.

The plan matches elective deferrals "equal to 50% of the total elective employer contribution ... subject to a maximum employer matching contribution of 2% of eligible compensation for such plan year". However, the following paragraph has this additional qualifier: "... in determining the maximum matching contribution (i.e. 2% of a participants eligible compensation for such plan year), the determination shall be made separately with respect to each payroll period ...".

We have the following for a monthly payroll period:

Participant A is paid $25,000 per month and contributes 8% of compensation for January - June and 0% of compensation for July - December.

Participant B is paid $25,000 per month and contributes 4% of compensation for January - December.

Ignoring contribution and compensation limits we have:

Participant A earned $300,000 for the year, contributed $12,000 (4% of comp) and received a match of $3,000 (1% of comp).

Participant B earned $300,000 for the year, contributed $12,000 (4% of comp) and received a match of $6,000 (2% of comp)

I interpret this to mean that the annual allocation is the sum of each monthly allocation for the year. Therefore, the following from 1.401(a)(17)-1(b)(iii)(A) is relevant:

"For example, if a defined benefit plan provides that the accrual for each month in a plan year is separately determined based on the compensation for that month and the plan year accrual is the sum of the accruals for all months, then the annual compensation limit for each month is 1/12th of the annual compensation limit for the plan year."

I would therefore apply the compensation limit on a monthly basis such that Participant A is limited to a $2,500 match and Participant B is limited to a $5,000 match.

Does anyone disagree with this interpretation? If so, why?

A company self-insures its medical plan. It wishes to provide coverage to a group of employees (predominately highly compensated) without requiring them to pay a portion of the premium (which it requires other employees to do). Can it require the group to pay the same premium co-pay but then gross up the premium co-pay and pay it as taxable compensation in the same pay check? What is the risk that the IRS will view this as evading the nondiscrimination tests?

We are auditing hardship withdrawals processed by our RK. There is a difference of opinion on whether the withdrawal should have been approved based the documentation submitted. is there a published guide on acceptable documentation? I cannot find this on irs.gov or other sites.

Examples:

- Withdrawals for Loan modifications have been approved without documentation of a specific date to pay to avoid foreclosure.

- Loans approved for home purchase without documentation of mortgage. Isn't this double-dipping if they also took a mortgage out for the purchase? Ppt was paid full amount of home purchase from hardship.

- EOBs not accepted for medical/dental, but a payment plan is considered proof of treatment.

Thanks for any guidance you can provide.

409A offers a special rule to determine when an employee is treated as "providing the services" for commission payments. In the preamble, the IRS states that the reason for this is that it is hard to determine when the services are performed for commissions.

Unfortunately, the sales commission compensation rule is limited. For example, an employee does not receive sales commission unless a "substantial portion of services provided" consist of "direct sale of a product or service to an unrelated customer."

What if the employee only does a little "direct sale" work but wants to defer his commissions? When are the services performed then?

On one of the many PBGC audit's that we've had over the last year - one of my clients is being forced to pay some additional interest to certain participants due to the date they were paid out versus the date their PVAB was calculated. We did a final 5500 for 2010. Now the client must pay $x to around 10 participants and do 1099's. I don't know whether this makes it necessary for us to file a new final 5500 for 2012. I am sure that if we do so, we'll end up with inquiries about where 2011 is. Has anyone had this situation and do you know what we should do?

thanks for any thoughts.

S

I have recently taken over a client that has a 403B and a SEP, yuk.

I am not versed that well in either but in regards to the 403(b), currently held at T Rowe, I am trying to determine whether this is a true ERISA plan or not. The CPA guessed when completing a service agreement with T Rowe and put no however that wasn't based on any real knowledge.

The plan is deferral only. It again is offered through T Rowe where by the participants can pick from a group of funds. All our eligible and that is all that is known.

There is no plan document nor has there ever been.

This actually all came to light as I was trying to determine information on the SEP plan which those questions go in another forumn I suppose although if anyone knows the answer to the easiest way to amend a SEP document that hasn't been touched since the early 90's and what exactly I need to provide participants each year and if I need to go through a correction program because no real documentation was ever kept, that would be great please reach out to me.

Actually I have all the same questions for each plan. Just not my cup of tea and need direction and confirmation from the research I have done.

Thanks

I have a plan that is using cross testing for 2011. The PS requirements are 1 Year, 1000 hrs. The plan is top heavy. I have about 5 NHCEs who were hired in 2011. I know that if I test them separately for the rate group (since they are statutory excluded), I only have to give the 3% TH min. If I want to count them in the rate group (say they are all very young) I would then have to give gateway.

My question is this: Say only 2 out of the 5 who are statutory excluded would actually help the rate group if they were given the gateway. Can I give gateway to only those two and in turn only bring those two into the rate group (keeping the other three stat excluded nhce's tested separately)? Or would I have to include the other three NHCE's (including giving them gateway). hope that makes sense.

We are having a husband & wife plan currently under audit and the agent is challenging the the allocations for owner and spouse both with comp over the 401(a)(17) limit.

Company made $98K PS - $49K each

Participants elected and deposited $5,500.

My understanding is that since the deferals force the allocation over the $49,000 415© limit for the year in question they are recharaterized under 414(v) as catch-up contributions. Auditor is stating there is a 415© violation for exceeding the limit.

I'm sure I've seen nearly this exact question asked before here but could not find it with a search on this "Retirement Plans in General" or "401(k)" sub-forum so I guess my seach skills just aren't very good.

edit - to add final treasury reg

It ssems to me clear under ---

1.414(v)-1)b)(1)(i) A statutory limit is a limit on elective deferrals or annual additions permitted to be made (without regard to section 414(v) and this section) with respect to an employee for a year provided in section 401(a)(30), 402(h), 403(b), 408, 415©, or 457(b)(2) (without regard to section 457(b)(3)), as applicable.

that this leads to recharaterization.

Has anyone had a problem with auditors when pointing this out? Do they continue to challege uder 415©?

Hey everyone,

I have a client who wants to adopt a new retirement plan design for 2012. They have a SIMPLE 401(k) Plan in place that is more than 10 years old and do not want to wait until 12/31/12 to terminate it.

My question: if we intentionally cause the SIMPLE 401(k) Plan to become disqualified now by adopting a new 401(k) profit-sharing plan and a new pension plan (thus failing the exclusive plan rule), what does that mean for the SIMPLE 401(k) plan? I know that all 2012 deferrals (no match was made yet) will become excess contributions and must be returned to the participants, but what about accumulated benefits from prior years? Is the plan disqualified for 2012 contributions alone, or for all assets currently maintained in the plan? When the Plan is disqualifed, then does it need to be immediately liquidated? If so, are the assets (with the exception of the 2012 deferrals) eligible to be rolled over into another qualified retirement account or must they be distributed and taxed immediately? Has anyone encountered this situation (either intentionally or unintentionally) and not corrected through EPCRS? I have not been able to find guidance on this side of the issue.

Thanks in advance for any insight/input.

Okay, here are a couple of questions that scream PT, but I think I have seen something recently on one of these issues. Any help is appreciated.

1) Mother has a trust. The beneficiary of the trust is not her children. she has a residence in the trust. Can her daughter (who has a solo 401K) plan purchase the property from the trust. I think not, but want to know if I am missing something. Thanks.

2) Solo 401K plan purchases an office building. Can the 401K rent space to the 401K account holder provided both can demonstrate that the rent is commensurate with the rent for the area and the building? I seem to think I have seen something on this that would permit this type of activity. Any thoughts? Thanks.